How Did Pakistani Bonds Draw Its Largest Foreign Funding in 19 Months

The sovereign bond market in Pakistan has registered its highest inflows from foreign investors in 19 months, with net inflows touching $176 million in January, as per data from the central bank compiled by Bloomberg. This is a marked reversal from the $50 million outflows in the same month last year.
The increase in inflows shows that investor confidence is improving, and this is mainly because of the improvement in the rupee.
The Pakistani rupee is up from its low levels in July and is expected to mark the eighth successive month of appreciation against the dollar. The rupee was trading at around 279.8 to the dollar on Friday.
The general economic environment has also become more supportive. The foreign exchange reserves have improved to cover more than three months of imports, partly due to a $7 billion loan package from the International Monetary Fund that was obtained in September 2024. It is thought that the general stability of the currency and the improvement in the balance of payments position have made local bonds more attractive to overseas investors.
Mohammed Sohail, chief executive of Topline Securities Ltd., said currency stability likely played a key role in drawing funds back into the market. BMI, a Fitch Solutions unit, expects policymakers to maintain the rupee at roughly 280 to the dollar this year.
Khurram Schehzad, adviser to Pakistan’s finance minister, also pointed to currency stability, better external accounts and policy continuity as factors supporting the renewed foreign interest. A large majority of the funds, approximately 85%, were invested in short-term papers that have a maturity period of one year or less.